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TMI Blog2021 (7) TMI 1067X X X X Extracts X X X X X X X X Extracts X X X X ..... pects cannot obviously be looked into by this Court in writ jurisdiction or even a winding-up Court while seized of the winding-up proceedings, but a Special Body like NCLT can definitely look into all the aspects of the matter as it is vested with the powers of CIRP (Corporate Insolvency Resolution Process) as enacted in the provisions of IBC, 2016, as defined in Chapter-2, Sections 6 to 32A of the IBC, 2016. In the inherent plenary jurisdiction under Article 226 of the Constitution of India read with Clause 15 of the Letters Patent vested in us, while deciding the present Letters Patent Appeal and Special Civil Application No.11116 of 2008, we are therefore of the considered opinion that entire litigation of these two corporate bodies viz. GPPML and SIL deserves to be decided by the NCLT by examining the claims, counter-claims, defences and other relevant aspects of all the parties involved in the matter afresh in respect of both the corporate entities in question GPPML SIL without being influenced by any observations made by any Forum below or OTS Settlement by GSFC SIL nor such transfer of proceedings depends upon filing of the application by any party - the developmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd others Vs. Gujarat State Financial Corporation and others has been filed by the Guarantors-Shareholders of the Defaulter Company - M/s. Ganpati Pulp and Paper Mills Limited (GPPML) (now in liquidation) with the Official Liquidator attached to High Court of Gujarat, aggrieved by the order of the learned Single Judge dated 06.10.2010 (Coram: Hon ble Mr. Justice K.S. Jhaveri) in Special Civil Application No.12979 of 2009 Lalitaben Govindbhai Patel and others Vs. Gujarat State Financial Corporation and seven others. 2. The said Special Civil Application No.12979 of 2009 was filed by the petitioners - Guarantors-Shareholders of GPPML challenging the One Time Settlement dated 10.06.2009 between Gujarat State Financial Corporation (GSFC) and M/s.Shree Industries Limited. 3. Though this case has a chequered history, but we need not to go into all the details of facts in view of the order proposed to be passed by us in this case, and therefore, we would quote our previous interim orders in the said Letters Patent Appeal No.2480 of 2010 itself and extracts of the learned Single Judge s order impugned in the Letters Patent Appeal as also the Written Submissions of the learned Counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be recovered by GSFC and they could also take possession of the property especially in view the order of this Court and orders of BIFR and AAIFR. 8.5 GSFC had floated several One Time Settlement Schemes. One of the schemes was with regard to purchasers of assets taken over by Corporation and sold under Section 29 of the SFC Act. SIL therefore applied for availing the said One Time Settlement. 8.6 In pursuance of the said application of SIL and the OTS Schemes prevailing with regard to GSFC, the Board of GSFC accepted the application for OTS of SIL since the prerequisites for applicability of the said OTS were fulfilled by SIL. GSFC vide letter dated 12th May 2009 conveyed to SIL that as per the OTS Scheme the final amount payable by SIL to GSFC was worked out to ₹ 67,07,599/- as on 31st December 2008. 25% of the said OTS amount was to be paid as down payment and the balance was to be paid in 4 monthly installments. Vide letter dated 14th June 2009 SIL accepted the terms and conditions of the OTS and other conditions as conveyed by GSFC s letter dated 12th May 2009 and also submitted post dated cheques. By 12th October 2009 the last of the four post dated cheques wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ners and they are not at all concerned with it. 8.12 It is also required to be noted that as of from the year 1990 the suits were pending. 8.13 The respondent No.1 Gujarat State Financial Corporation had introduced One Time Settlement (OTS) Scheme to the purchasers of assets taken over by the Corporation and sold under section 29 of the SFC Act. This scheme was floated in view of the fact that there are a few cases in which Corporation has sold assets in auction and purchasers have not made full payment after making initial down payment. Many purchasers have made default and requested for one time settlement. The assets are old and are getting depreciated with passage of time. Moreover it was reported that the recovery position of the Corporation had declined considerably affecting cash flow. It is under these circumstances that the One Time Settlement Scheme has been introduced. The SIL was a defaulter. The property in question had already been taken over by the respondent no.1. The SIL had requested for availing of OTS Scheme. Since the SIL complied with all the criteria stipulated in the OTS Scheme the respondent no.1 has accepted the said proposal and the payment has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Civil Application, a prudent decision is taken, which cannot be faulted. 11. In the premises aforesaid, I do not find any merits in the present petition. The same is therefore dismissed. Notice is discharged with no order as to costs. Order of status quo stands vacated. 12. At this stage, Mr. Mihir Joshi,learned Senior Counsel, requests for extension of interim relief for approaching higher forum. However, since the other petition i.e. Special Civil Application No.11116 of 2008 is pending and the same is listed for hearing on 18th October 2010 it will not be appropriate to extend the interim relief. Hence the prayer is rejected. 5. In the present Letters Patent Appeal, a Coordinate Bench of this Court had initially passed the status quo order on 13.12.2010 (Coram: Hon ble the Chief Justice Mr.S.J. Mukhopadhaya and Hon ble Mr. Justice K. M. Thaker) . The said order is also quoted below: Taking into consideration the fact that for the very same mortgaged property in question, as another writ petition, Special Civil Application No. 11116 of 2008, has been preferred by the Gujarat State Financial Corporation, they sought to withdraw the said writ petition, but were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e action under section 29 of the State Financial Corporation Act, 1951 was taken and the Assets of the said Borrower M/ s. Ganpati Pulp and Paper Mills Ltd., were taken over and the same were sold by GSFC in favour of Respondent No.5 M/s. Shree Industries Ltd. 3. A part of the sale consideration was converted into loan and the said purchaser M/s. Shree Industries Ltd. also defaulted and the said purchaser / borrower approached the BIFR / AAIFR under the provisions of the Sick Industrial Companies (Special Provisions) Repeal Act, 1985, as it then existed and while the proceedings were pending before the BIFR / AAIFR, a new law in the form of the Insolvency and Bankruptcy Code, 2016 (for short, the IBC, 2016 ) came to be enacted by the Parliament and the proceedings regarding insolvency Resolution / Recovery from the defaulting corporate debtor on its winding-up were to be taken up by the National Company Law Tribunal (NCLT), which was constituted under the provisions of Section 408 of the Companies Act, 2013. 4. Section 408 of the Companies Act, 2013 stipulates that the NCLT shall exercise such powers and functions as may be conferred on it by the provisions of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red to the NCLT, by any of the parties or by the Court, is a question for our consideration. 8. In these circumstances, as prayed by the learned counsel, we grant some time to them to make submissions on the following points:- (i) Whether any proceedings, in any manner, in respect of the Assets of the Company in question M/s. Ganpati Pulp and Paper Mills Ltd or M/s. Shree Industries Ltd., are pending before the NCLT or not and if the proceedings are pending, the details and status of the same may be placed before the Court ? (ii) If no such proceedings are pending before the NCLT as of now, whether this Court can refer the entire matter to the NCLT and direct it to decide all the questions of law involved in the present case and the questions of facts, including the respective rights of the secured creditors, leaving it open to the parties to raise their respective claims / counterclaims and defences before the NCLT at this stage or not ? 9. Put up on 09.02.2021 on the top of the Board, as prayed. (ii) Order dated 17.02.2021 passed in LPA No.2480 of 2010 with other connected matters: 1. We have heard this matter at length on 04.02.2021, 09.02.2021 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the beneficial result of the application of the Code, such winding up proceeding is compulsorily transferable to the NCLT to be resolved under the Code. Even post issue of notice and pre admission, the same result would ensue. However, post admission of a winding up petition and after the assets of the company sought to be wound up become in custodia legis and are taken over by the Company Liquidator, section 290 of the Companies Act, 2013 would indicate that the Company Liquidator may carry on the business of the company, so far as may be necessary, for the beneficial winding up of the company, and may even sell the company as a going concern. So long as no actual sales of the immovable or movable properties have taken place, nothing irreversible is done which would warrant a Company Court staying its hands on a transfer application made to it by a creditor or any party to the proceedings. It is only where the winding up proceedings have reached a stage where it would be irreversible, making it impossible to set the clock back that the Company Court must proceed with the winding up, instead of transferring the proceedings to the NCLT to now be decided in accordance with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vang D. Trivedi appearing in the present case before us for the respective parties on the issue whether the provisions of the Sick Industries Companies Act (Special Provisions) Repeal Act, 2003, as amended by Section 252 of the Insolvency and Bankruptcy Code, 2016 with effect from 01.12.2016 the date notified for the purpose of Section 4(b) of the Sick Industries Companies Act (Special Provisions) Repeal Act, 2003, can be transferred to the NCLT, at this stage. 7. We have also summoned the record of the winding-up petition, namely, Company Petition No.139 of 1985, M/s. Shethna Enterprises V. M/s. Ganpati Pulp and Paper Mills Ltd., in which a winding-up order was passed by a learned Single Judge as Company Court on 12.03.1986. The Office may place the record of the said winding-up petition before us on the next date. 8. Mr. Abhijit Joshi, learned counsel appearing for the Official Liquidator, also submits that a Status Report was filed in this Letters Patent Appeal in March 2011, along with the copy of the winding-up order dated 12.03.1986. He submitted that the Secured Creditor, Gujarat State Financial Corporation, had sold the Assets of the said defaulting Company, Res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh Court and submitted that even that Settlement did not fructify and M/s. Shree Industries Ltd. did not pay up according to the said Settlement to the Assignee of Bank of Baroda Respondent No.9. He submitted that the present Letters Patent Appeal is pending in this Court for the last more than ten years and because of the interim order of Status Quo granted by the Coordinate Bench of this Court, firstly, on 22.10.2010 and again on 13.12.2010 headed by the Hon'ble Chief Justice at that relevant time and in view of that interim order, which is continuing even now, the said Assignee of Respondent No. 3 ASREC (India) Ltd., which steps into the shoes of the Secured Creditor - Bank of Baroda, is unable to even negotiate or settle with the said Respondent No.5 Shree Industries Ltd. and in the interest of justice, the said blanket Status Quo order deserves to be modified and at least these parties should be directed to undertake the negotiations for Settlement of the dispute of the said Secured Creditor, the Assignee of Bank of Baroda M/s. ASREC (India) Ltd. and such other Secured Creditors who are waiting for recovery even through such Settlement and have not yet given their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the efforts made for that purpose and the reasons for not arriving at the Settlement, may also be produced in the form of Status Report by the concerned parties before this Court. To that extent, the earlier Status Quo orders dated 22.10.2010 and 13.12.2010 passed by the Coordinate Bench of this Court in the present Letters Patent Appeal No.2480 of 2010 shall stand modified. (II) The Settlement, if any, arrived at now under theaforesaid modification of the Status Quo order shall remain subject to the final decision of this Letters Patent Appeal and such further orders as this Court deems appropriate to be passed later on. 14. The learned counsel for the Official Liquidator has already been directed to produce before us the latest Status Report of the winding-up proceedings taken with regard to the Company in liquidation, namely, M/s. Ganpati Pulp and Paper Mills Ltd. 15. The record of the winding-up petition being Company Petition No.139 of 1985, M/s. Shethna Enterprises V. Ganpati Pulp and Paper Mills Ltd. and other related Interim Applications, if any, filed in that winding-up petition, along with the Court orders passed therein, may also be placed before us along ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ps for the said intention expressed by Respondent No.5 Shree Industries Ltd., can be given concrete shape. 3. In view of these submissions, let the meeting of these parties and other related parties as indicated in the Order dated 17.2.2021 passed by this Court take place at Bombay in the office of Respondent No.9 M/s. ASREC (India) Ltd., on 24th and 25th June 2021 at 11:00 a.m. It is expected that the concerned parties involved in this dispute particularly, Respondent No.5 and Respondent No.9 shall make it a point to convene and hold such meeting and proceed further in appropriate manner in the letter and spirit of the earlier directions of this Court and undertake the process of settlement of the dues as indicated in the said Order dated 17.2.2021. Let the Report of such meeting be filed by both these parties and be placed before this Court on the next date of hearing. 4. List the matter again on 1.7.2021. 5. A copy of the Report to be submitted to this Court shall be supplied to all the other learned Counsels appearing in the matter. (iv) Order dated 01.07.2021 passed in LPA No.2480 of 2010 with other connected matters: In this case, a detailed order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve Defences and other relevant aspects of the matter. We are therefore of the considered opinion that the exercise of extraordinary jurisdiction under Article 226 of the Constitution of India, in such cases of complex facts, financial statements claims will be inappropriate and such question of facts may not be properly adjudicated at all under Article 226 of the Constitution of India. Such fact finding exercise necessarily should be undertaken by the appropriate fact finding Tribunal and Authorities. We had also noticed in the previous proceedings in the present Letter Patent Appeal that after the sale of the unit in question belonging to defaulter unit M/s. Ganpati Pulp (In Liquidation) to M/s. Shree Industries Limited (SIL), though the said purchaser has settled some of the Secured Creditors, but admittedly some of the other Secured Creditors like Bank of Baroda and its Assignee M/s. ASREC (India) Limited and GIIC etc., had not yet been settled paid off. They may be either Secured or Unsecured Creditors claiming their recovery rights against the Assets of the defaulter Unit M/s. Ganpati Pulp in the present case. There may be valid or unsustainable defences on the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r who have already put in their appearance in this matter to file a brief two page Note either agreeing to the aforesaid proposed order of the Court or if they wish to make a submission against the aforesaid proposed order, they may do so with reason and case law, if any. The said brief Note not exceeding 2 to 3 pages may be submitted in the Court on or before 5th July 2021 and the matter may be placed for final orders before the Court again on 8th July 2021. 7. In view of the last order dated 01.07.2021, learned Counsels have filed their brief notes either opposing the said proposed order by which this Court intended to dispose of the Letters Patent Appeal without going into the merits of the case and to request the learned Company Judge, where the winding-up proceedings are pending against GPPML, who may if considered appropriate, and which, we in the presently obtaining legal position would strongly recommend to the learned Company Judge to transfer the proceedings of winding-up in Company Petition No.139 of 1985 to the NCLT, Ahmedabad who can go into all the claims, counter-claims and respected defences, even now because unfortunately, not only the original borrower GPPML ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on dated 10.07.2021: BRIEF NOTE OF THE APPELLANTS Issues in the LPA: 1. The question involved in the LPA is whether the auction purchaser (i.e. R.5-Shree Industries Limited/SIL) u/s.29 of the SFC Act, 1951, becomes the owner of the subject property (described at page 77 of the LPA) in absence of transfer by way of lease or sale by the Financial Corporations (i.e. R.1-GSFC, R.2-GIIC, R.3-BOB- now ASREC Limited and R.4-DB)? In the present case, after the action of taking possession of the subject property of R.6-Company (in liquidation) and after auction thereof, followed with the acceptance of the highest bid of R.5-SIL and the 'agreement' dated 27.11.1990 (pages 68-79), undisputedly R.5-SIL has failed to pay the full price and no sale deed is executed in favour of R.5-SIL. After the said agreement dated 27.11.1990, R.5-SIL was registered with the BIFR under the provisions of SICA, 1985. BIFR and AAIFR by orders dated 19.07.2007 (pages 32-47) and 02.05.2008 (pages 48-51) respectively, held against R1 GSFC and R2 GIIC that even in absence of sale deed in favour of R5 SIL by the Financial Corporations u/s. 29 of the SFC Act, the subject property purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the basic grievance of the Appellants that the subject property cannot be considered to be of the ownership of R.5-SIL in absence of a sale deed, remains undecided/unadjudicated. In view of the aforesaid (i.e. disposal of the LPA without adjudication on merits), the subject property of R.6-Company (in liquidation) will be treated as the asset of R.5SIL and not of the R.6-Company. This in the humble submission of the Appellants will be a irreversible situation / irreversible steps, as contemplated under paragraphs 22, 23 of the Hon'ble Supreme Court judgment in the case of Action Ispat and Power Private Limited ( Action Ispat ). Apropos the opinion expressed (in the last paragraph of page 13 of the order dated 01.07.2021) in the matter of exercise of jurisdiction under Article 226 of the Constitution of India, the Appellants humbly submit that as such the Learned Single Judge has already exercised jurisdiction under Article 226 of the Constitution of India and examined all the issues on merits . The Appellants therefore submit that this Hon'ble Court while exercising the appellate jurisdiction under Clause 15 of the Letters Patent will be required to examine the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scretion in favour of transfer for the reason that the subject property of the R.6-Company (in liquidation) is no longer an asset of R.6-Company and has infact become the asset of R.5-SIL. Further, it may be noted that under the last proviso to section 434(1)(c), after transfer, the transferred proceedings are to be treated by NCLT as an application for initiation of CIRP under the IB Code. However in present case, the very discretion to transfer may not be exercised as there will not be any purpose of initiating the CIRP in absence of the subject property of R6 Company. Consequently, the winding up proceedings will be retained by the learned Company Judge and there shall be no occasion for the NCLT to decide the claims, counter-claims, etc. as contemplated under the proposed order of this Hon'ble Court. Assuming that the winding up proceedings are transferred: Assuming that the discretion is exercised in favour of transfer by the learned Company Court, even then the Appellants humbly submit that the NCLT will not have the powers and/or the jurisdiction to decide the legality and validity of the orders of BIFR, AAIFR and the learned Single Judge which are subj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roviso of Section 434(1)(c) of the Companies Act, 2013 to the learned Company Judge seeking transfer of the winding up proceedings in respect of R-6 Company to the NCLT, (v) considering that after transfer of winding up proceedings to the NCLT, under the last proviso of Section 434(1)(c), the transferred proceedings are to be treated as an application for initiation of CIRP process, it would become necessary to revoke the winding up order dated 12.03.1986 (after 35 years)- because, as aforesaid, the CIRP process and winding up proceedings cannot continue simultaneously, (vi) as such, no circumstances exist so as to enable the learned Company Judge to exercise discretion in favour of transfer. Hence, the LPA and SCA 11116 of 2008 be heard and decided on its own merits. The entire proposal to request the learned Company Judge and thereafter to influence the NCLT on how to conduct the proceedings if the winding up proceedings are transferred, is completely beyond the scope of powers under Clause 15 of the Letters Patent, apart from not being in consonance with the last proviso to Section 434(1)(c) of the Companies Act, 2013. SCA 11116 of 2008 ( SCA ): The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e secured creditors had already filed application u/s. 7 of IBC. While in the instant case none of the creditors have approached NCLT under IBC. It may be noted that in the case of Winding-Up proceedings of Ganpati, the Winding-up petition was admitted by the Company Court as way back as on 12/03/1986. The main property of Ganpati was taken over by GSFC u/s. 29 of SFC Act and has been sold to SIL on 27/11/1990 by way of Public Auction and the possession thereof is handed over to SIL in the year 1990. (iv) None of the secured creditors have issued any notice to SIL under IBC or filed any application for the transfer of the present LPA proceedings to NCLT, as was the case in Action Ispat. II. The scope of the proceedings of LPA no. 2480/10 in SCA 12979/09, with which we are concerned, is limited to the adjudication and decision with regard to challenge by Guarantors of Ganpati (a stranger) as to whether the action of GSFC to enter into OTS with SIL is valid and legal or not. It may be noted that GSFC u/s. 29 had taken possession of the secured assets of Ganpati and sold to SIL by way of Public Auction for an amount of ₹ 3.88 Cr, in November-1990. The full amount of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted questions of fact and decided the case on the question of law. As such there are no disputed questions of fact in the instant case. It is only questions of law, in the facts of the case which is required to be decided by this Hon ble Div. Bench. IV. The pendency of Liquidation proceedings of Ganpati having its registered office in Ahemdabad before the Ld. Company Judge of this Hon ble High Court of Gujarat is a separate proceeding in respect of Ganpati and has nothing to do with the corporate entity of SIL or the assets owned by SIL, having its registered office in Delhi being subject to the jurisdiction of Delhi only. It is further reiterated that the only issue or the question for adjudication in the present proceedings of LPA i.e. whether the action of GSFC in entering into a settlement by virtue of OTS Scheme with SIL, in the circumstances of the case is valid and legal or not. V. Further, the judgement and order dated 09/12/2009 passed by the Ld. Single Judge of this Hon ble High Court can be interfered with (if at all) only by the Division Bench of this Hon ble High Court under the Letters Patent or by the Hon ble Supreme Court, but cannot be interfered with by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10.07.2021: BRIEF NOTES OF ARGUMENTS ON BEHALF OF GSFC RESPONDENT NO.1 In compliance of the Order of this Hon'ble Court, respondent No.1 Gujarat State Financial Corporation begs to file its Brief Points of Arguments in the present proceedings. 1. Petitioners have no locus standi to challenge settlement between GSFC and Shree Industries Limited, which is pursuant to policy of GSFC for OTS, for all concerned.. Properties of Ganpati i.e. GPPL were taken over and sold by Public Auction U/s. 29 of SFC Act, by GSFC in the year 1990. Said action was not challenged at relevant time, nor even today by GPPL. There are no factual disputes what so ever between the parties to these Cognate Proceedings and that in neither of pleadings such avarments contended by any of the parties to these proceedings. 2. Infact, As soon as the properties of Ganpati i.e. GPPL were sold in the year 1990, whatever amount was paid, was realized, the same given credit towards the dues of GPPL in the year 1990 itself and therefore, by settling dues with Shri Industries Limited, GSFC does not increase any liability of a single rupee of GPPL. It is also not in dispute that the amounts wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the guarantors of GPPL the present appellants have no locus standi or right whatsoever to challenge the settlement between GSFC and SIL. It is also the submission that other creditors wise Dena Bank has already settled with SIL, which is not challenged so far and other creditors GIIC and Bank of Baroda appear desirous to settle their accounts also with SIL and for that drawing attention of the said fact, this Hon'ble Court has been apprized already. 6. It is pointed out that there are two separate and independent transactions by GSFC: (i) Action u/s 29 of taking over the properties of GPPL and sale by Public Auction by GSFC, in the year 1990, for ₹ 3.88 crores in favour of SIL (said action is not challenged by GPPL.) (ii) Settlement pursuant to OTS between GSFC and SIL for balance unpaid amount. Neither GPPL nor its guarantors are concerned with it because the realization' of dues of GPPL by Auction Sale under Section 29 had already taken place in 1990 and amount of sale i.e. ₹ 3.88 crores was realized and given credit of (set off) towards the dues of GPPL in the year 1990 itself.. It remains crystallized for ₹ 3.88 crores as of 1990. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany sought to be wound up become in custodia legis and are taken over by the Company Liquidator, section 290 of the Companies Act, 2013 would indicate that the Company Liquidator may carry on the business of the company, so far as may be necessary, for the beneficial winding up of the company, and may even sell the company as a going concern. So long as no actual sales of the immovable or movable properties have taken place, nothing irreversible is done which would warrant a Company Court staying its hands on a transfer application made to it by a creditor or any party to the proceedings. It is only where the winding up proceedings have reached a stage where it would be irreversible, making it impossible to set the clock back that the Company Court must proceed with the winding up, instead of transferring the proceedings to the NCLT to now be decided in accordance with the provisions of the Code. Whether this stage is reached would depend upon the facts and circumstances of each case. 3) In the facts of the present case, the liquidator has still not taken possession and control of the registered office of the appellant company and its factory premises, records and books, hen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt has missed admitted facts in writ petition and LPA that auction price is paid and there is no privity between SIL (auction purchaser) and other creditors. Therefore, discretion in the proposed order is not exercised judicially. vi. The fact that money under Auction is already paid can be ascertained on affidavits. No affidavit of any creditor raising any dispute is filed much less dispute of fact. The court in the proposed order has not applied mind as to what facts are disputed or which complex question has arisen, and hence exercise of discretion to refer to winding-up court is not based on sound judicial principles. It is also not clear as to what is referred to company court since proceedings under SFC act, 1951 are independent of proceedings under winding-up and finalised 31 years ago. The discretion therefore is based on hunches causing failure of justice making auction purchaser to wait 31 years after purchase [(1969) 3 SCC 769 Gunwant Kaur Smt v. Municipal Committee, Bhatinda- para 14] vii. Proceedings under State Financial Corporation act, 1951 will prevail over proceedings of company judge under winding up. (2003) 10 SCC 482 International Coach Builders Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re is no petition on record of any financial corporation challenging legality and validity of auction and no financial corporation or Bank has stated on affidavit that there is existence of debt against SIL which is an auction purchaser. E. Hon ble Delhi High Court order is already complied with. No execution of Hon ble Delhi High Court order is preferred by any party and that is not the issue in this LPA or writ petition. F. An auction purchaser of a property is an outsider to winding-up proceedings and the court cannot refer the issue in relation to auction proceedings to winding-up court when the auction was conducted outside winding-up proceedings under a special law of State Financial Corporation Act. Even otherwise there was no winding-up order in operation on the date of sale. In Bakemans Industries (P) Ltd. v. New Cawnpore Flour Mills, (2008) 15 SCC 1 at page 20 the court held: 37. The 1951 Act indisputably is a special statute. If a financial corporation intends to exercise a statutory power under Section 29 of the 1951 Act, the same will prevail over the general powers of the Company Judge under the Companies Act. 38. There cannot be any doubt whatso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titutions under the Special Laws like State Financial Corporation Act, 1951, etc. can be undertaken by the writ Court under Article 226 of the Constitution of India. From the facts contained in the various orders above, it is clear that in the present case, the parties have not only indulged in filing Civil Suits, Writ Petitions and Letters Patent Appeals under Article 226 of the Constitution of India, but also have gone for forum shopping and while the auction purchaser - SIL not only was involved in litigation before this Court, and entered into an alleged OTS (One Time Settlement) with GSFC which is with a doubtful integrity to say the least and is under a serious contest by left out Secured and Unsecured Creditors, but SIL also approached the Hon ble Delhi High Court by way of writ petitions merely because it had a namesake registered office of the Company in Delhi also, whereas its industry in question is in Gujarat. This kind of scattering the litigation in various Forums is the root cause of multiplicity of litigation and amounts to misuse and abuse of process of law and by sheer passing of the different orders which may or may not be conflicting orders inter-se by different ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thored by Hon ble Mr. Justice Rohinton Fali Nariman. In which the Hon ble Supreme Court has clearly laid down in Paragraph No.22 quoted above that the winding-up Court or the Company Court should transfer the winding-up proceedings to NCLT, not only at the initial stage, but even in the mid stage of winding-up proceedings, unless the winding-up proceedings have reached a stage where it would be irreversible and making it impossible to set the clock back and then only that the Company Court must proceed with the winding-up, instead of transferring the proceedings to NCLT under IBC provision. Of course whether this stage is reached or not would depend upon the facts and circumstances of each case. 10.4 In the present case, we have noted above that the winding-up proceedings in Company Petition No.139 of 1985 - M/s. Shetna Enterprises Vs. M/s. Ganpati Pulp and Paper Mills Limited (GPPML) have not reached in advanced stage and in fact, not even taken off, basically in view of the fact that the assets of the Defaulter Company - M/s. GPPML were taken over by GSFC in exercise of its statutory powers under Section 29 of the SFC Act, 1951 and sold away to SIL at a price which was subject ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e events which have taken place so far and orders passed by different Courts, or want to avoid the further legal action against them by the Creditors like Bank of Baroda or GIIC, the Secured Creditors or Unsecured Creditors and workmen seeking to take legal recourse against the Defaulter Companies for realizing their dues which run into crores of rupees now. 10.8 In the inherent plenary jurisdiction under Article 226 of the Constitution of India read with Clause 15 of the Letters Patent vested in us, while deciding the present Letters Patent Appeal and Special Civil Application No.11116 of 2008, we are therefore of the considered opinion that entire litigation of these two corporate bodies viz. GPPML and SIL deserves to be decided by the NCLT by examining the claims, counter-claims, defences and other relevant aspects of all the parties involved in the matter afresh in respect of both the corporate entities in question GPPML SIL without being influenced by any observations made by any Forum below or OTS Settlement by GSFC SIL nor such transfer of proceedings depends upon filing of the application by any party. Some Creditors have already agreed to this proposal and therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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